Fiscal Balance and Current Account in Professional Forecasts

This paper investigates the relationship between financial institutions' expectations of the current account and the fiscal balance. Using professional macroeconomic forecasts for the G‐7 countries, we find a positive relationship between forecasts of the cyclically adjusted fiscal balance deficit and forecasts of the current account deficit, indicating that professional forecasts embody links implied by the twin deficits hypothesis. In assessing the relationship between the forecasts of the fiscal deficit and the current account, we find that forecasters correctly make the distinction between the effect of fiscal policy and automatic stabilizers.     

Placing Borders in Development

Development is inextricably related to the state-centred cartography of world spaces defined by borders, both in its historical trajectory and contemporary entanglements. Yet the multiplicity of channels and directions characterising their articulation are scarcely explored. This article contributes to this emerging field of enquiry. It delineates the essential traits of the borders and development nexus by establishing a systematic dialogue between the fields of Border Studies and Development Studies, a dialogue framed by concerns with scalar politics. More specifically, the paper places borders in development in two ways. First, it places borders in Development Studies: it identifies borders as a useful analytical vantage point that lay at the intersection between state- and non-state centred geographies of development. Second, it places Border Studies in development: focusing on the tension between borders and bordering processes, it interrogates economic growth- and poverty-related policies. Three contributions to the study of development arising from placing borders in development in this way are highlighted. The paper also expands the emerging field of enquiry concerned with the relation between borders and development, by considering development policies not yet been examined through the prism of borders, and by emphasising the hierarchical and yet unpredictable nature of the borders and development articulation. At its broadest, the discussion dis-entangles the multiplicity of scales and directions in which borders, bordering and the development process intersect. It is at this scalar intersection that the force of development, and the potentials for engaging, opposing, avoiding, or subverting it, lay.     

Moonlighting Politicians: Motivation Matters!

We study self‐selection into politics and effort once in office of citizens with different abilities and motivations in a framework where moonlighting is allowed. We find that high‐ability motivated (public‐fit) politicians exert higher effort in politics than high‐ability non‐motivated (market‐fit) politicians, and that high‐ability citizens, both public‐fit and market‐fit, may decide to enter politics. We test our predictions using a database of Italian parliamentarians for the period 1996–2006. We find evidence of advantageous selection of both market‐fit and public‐fit parliamentarians. We also show that public‐fit parliamentarians have higher voting attendance and that only voting attendance of market‐fit parliamentarians is negatively affected by income opportunities.     

Logarithmic quasi-homothetic preferences

We study a class of quasi-homothetic preferences, which result in demands that are logarithmic in own prices when these have a negligible impact on aggregate prices (as in monopolistic competition models). Thus marginal revenues are computationally friendly and well behaved.     

Deferred taxation under default risk

In this article, we have used a continuous EBIT-based model to study deferred tax liabilities under default risk. Quite surprisingly, default risk has been disregarded in research on deferred taxation. In order to underline its importance, we first calculated the probability of default, over a given time period, together with the contingent value of tax deferral. We then applied our theoretical model to a sample of 27,749 OECD companies. We showed that, when accounting for both firms with a negative EBIT and firms with a probability of default higher than 50% (over a 10-year period), a relevant percentage of firms were close enough to default. Hence, the expected present value of deferred taxes is much lower than that obtained in a deterministic context. From the Government’s point of view, deferred tax liabilities are a risk-free loan. Since only a portion are subsequently repaid, the Government should account for future losses due to companies’ default. So far, these estimates have been missing, although techniques do exist and are quite practical.     

Short-memory equilibrium in stochastic overlapping generations economies

In stochastic OLG exchange economies, we show that short-memory equilibria—the natural extension from deterministic economies of steady states, low-order cycles, or finite state-space stationary sunspots equilibria—fail to exist generically in utilities. As a result, even with independent and identically distributed exogenous shocks there is serial correlation in endogenous economic variables in equilibrium. This arises even if utilities are time-separable, some goods inferior, and there are no technological lags. Hence, the origins of economic fluctuations can be traced only to the demographic structure of a heterogeneous agent, multiple-good economy.